Buzzard Bicycle specializes in custom painting and design of bicycles. December 31 is the company’s fiscal...

Buzzard Bicycle specializes in custom painting and design of bicycles. December 31 is the company’s fiscal year-end. Information necessary to prepare the year-end adjusting entries appears below.

A three-year fire insurance policy was purchased on July 1, 2021, for $19,200. The company debited Prepaid Insurance for the entire amount.
Employee salaries of $25,800 for the month of December will be paid in early January.
On November 1, 2021, the company received $7,200 in cash from a customer requesting a custom design for six identical bikes ($1,200 each). Deferred Revenue was credited for the entire amount. By the end of the year, four of the bikes have been completed.
Supplies at the beginning of the year totaled $2,800. During 2021, additional supplies of $18,800 were purchased, and the entire amount was debited to Supplies. Supplies remaining at the end of the year total $4,800.
Buzzard paid a local radio station $12,800 for four months of advertising on December 1, 2021. The advertising will appear evenly over the four-month period. The company debited Prepaid Advertising for the entire amount.
Buzzard borrowed $37,200 on March 1, 2021. The principal is due to be collected in five years. Interest is receivable each March 1 at an annual rate of 10%.

Required:

Record the necessary adjusting entries on December 31, 2021. (Do not round intermediate calculations. If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Expert Solution

Answer:

Necessary adjusting entries are:

ekkarill92 answered 2 years ago

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